When people enter the foreign exchange market, their goal is to be successful and make profit. Despite the recent popularity of Forex trading in Nigeria, a lot of Nigerians are still skeptical about trading the forex market. This is majorly due to the (over exaggerated ) risks involved in trading Forex. A good percentage of traders still smile to the bank as they cash out severally from the Forex market.
Ever wondered why some are getting it right while some are getting it all wrong?
Here are some of the core reasons traders lose money in Forex.
A lot of people come into to the Forex industry with the wrong expectations. People need to know that the Forex market is not a get-rich-quick scheme. Those cashing out heavily in Forex spent time educating themselves about the market because becoming a Forex trader, is not an overnight job.
It takes time and patience to learn how to trade the Forex market, as much as it takes time and patience to learn any other skill you may have. Time is spent on training plans, terminologies, chart readings and strategies. All these are very important basics of Forex trade education.
Just like every business needs a proper business plan to map out its operations and survival, every trader (experienced or not), needs a trading goal and plan.
Most Traders don’t have a proper trading plan and some of those who actually do have a plan don’t stick to it.
Having a well-thought-out plan can easily make the difference between profit and losses. A trading plan helps the trader to achieve the established trading goals such as:
Some traders decide to trade daily, some weekly, while some scalp. The decision boils down to whatever goals that have been set, and the plans mapped out to achieve them. Stick to the goals and plans set, even when losses are encountered.
There are many ways of studying the market charts to determine what position to enter a particular currency pair at any given time. This technique is known as strategy in Forex.
Most traders develop their own strategy and back test them, while several others adopt ready-made strategies available on the internet. Deciding on a strategy that looks after all elements of money management is key.
Whatever strategy you use as a trader, it is important to understand and test your strategy properly before going on a life account with it. Every strategy has its winning and losing period, so try to avoid changing or tweaking your strategy. A trader needs to study and understand how strategies perform in its winning periods and in its losing periods.
Have confidence in whatever strategy you have chosen or developed, and always expect to have losing periods, then you won’t doubt and tweak your strategy. With time, it will bounce back and you can start making your profit again.
This is the most common downfall of many Forex traders. Trading Forex is systemic and logical. It requires sticking to it as logically as possible. A lot are incapable of doing this because of emotions. Some traders lose it after two or three losses and start to try and beat the market, while some traders equally make a few profits and start taking unnecessary risks in a bid to make more.
Traders need to learn to accept and manage losses. The most important thing is how to climb the recovery ladder. Most traders emotionally and negatively respond to a loss and then take bigger trades and bigger risks in order to recover the loss. They forget their plans and strategies and try to control or beat the market by holding onto a position they believe represents a possible win and this keeps going on and on, eventually leading to multiple losses or possibly crashing the account.
Risk management is key to the survival of any trading account. Even professional traders often get trapped not properly managing their risk. Your risk/reward ratio should be central to managing your funds. What this means is that, it is not compulsory to make profit on every trade but the most important thing is to maintain the capital you have. Avoid taking trades that are not worth the risk. Having unrealistic goals also lead to taking unnecessary risks.
Another misconception about Forex trade that results in losing money is people believing they can start up trading and make tons of money with low capitals. Small accounts take time and work to make a decent living out of it. Trading accounts with small capitals require proper trade sizing, but unfortunately most traders milk the market by using inappropriate lot sizes and over-leveraging to generate large returns on a small amount of initial capital.
This can be resolved by starting with a reasonable sum of about $1000, and trading with micro lots, otherwise, whatever goals that has been established may be difficult to achieve.
In conclusion, the easy accessibility of the Forex market does not mean caution shouldn’t be applied. Getting properly educated about Forex is very important to a trader’s failure or success. Ignoring the factors mentioned earlier will lead to a potential disaster for any Forex trader.
WRITTEN BY JOSEPH YETUNDE ANUOLUWAPO
Gemini Capital Markets LLC
Gemini Capital Market is a bespoke Forex and CFD’s broker in Nigeria, with offices in over 10 countries including Australia, Hong Kong, and the Uk.
Get a trading account with us today: http://bit.ly/33OgMJk
All investments entail risks and may result in both profits and losses. In particular, trading leveraged derivative products such as Foreign Exchange (Forex) and Contracts for Difference (CFDs) carries a high level of risk to your capital. All these derivative products, many of which are leveraged, may not be appropriate for all investors. The effect of leverage is that both gains and losses are magnified. The prices of leveraged derivative products may change to your disadvantage very quickly, it is possible for you to lose more than your invested capital and you may be required to make further payments. It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. Before deciding to invest in any financial product, you should carefully consider your investment objectives, trading knowledge and experience and affordability. You should seek independent professional financial advice if you do not understand the risks involved. You should only trade in Forex and CFDs if you have sufficient knowledge and experience of the risks involved in trading such products and if you are dealing with money that you can afford to lose. GC assumes no liability for any loss sustained from trading in accordance with a recommendation. This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.
GC Markets is the trading name of Gemini Capital LLC. Gemini Capital LLC (“GC”) is a company duly incorporated in Saint Vincent & The Grenadines and registered by the Financial Services Authority (‘FSA’) under Number 228 LLC 2019. GC is also registered as a Money Services Business (“MSB”) with the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) under Number M20513484 and registered with National Futures Association (“NFA”) of United States of America under Number 0533039. Our registered address is located at Hinds Building, Kingstown, Saint Vincent and the Grenadines.
Kindly click the button below to register via Facebook Messenger